SEC Filing | Cabot Corporation

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cbt-10q_20210630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5667

Cabot Corporation

(Exact name of registrant as specified in its charter)

Delaware

04-2271897

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Two Seaport Lane

Boston, Massachusetts

02210-2019

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 345-0100

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	CBT	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The Company had 56,723,537 shares of common stock, $1.00 par value per share, outstanding as of August 4, 2021.

INDEX

Part I.	Financial Information

	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income (Loss)	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Changes in Stockholders’ Equity	8
		Notes to the Consolidated Financial Statements	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
	Item 4.	Controls and Procedures	34

Part II.	Other Information
	Item 5.	Other Information	35
	Item 6.	Exhibits	36

Part I. Financial Information

Item 1.

Financial Statements

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

	Three Months Ended June 30						Nine Months Ended June 30
	2021			2020			2021			2020
	(In millions, except per share amounts)
Net sales and other operating revenues	$	917		$	518		$	2,505		$	1,955
Cost of sales		703			449			1,884			1,592
Gross profit		214			69			621			363
Selling and administrative expenses		68			52			200			230
Research and technical expenses		12			13			41			41
Specialty Fluids loss on sale and asset impairment charge		—			—			—			1
Income (loss) from operations		134			4			380			91
Interest and dividend income		2			1			6			7
Interest expense		(12	)		(13	)		(37	)		(41	)
Other income (expense)		(1	)		(3	)		(9	)		(6	)
Income (loss) before income taxes and equity in earnings of affiliated companies		123			(11	)		340			51
(Provision) benefit for income taxes		(30	)		5			(93	)		(9	)
Equity in earnings of affiliated companies, net of tax		2			1			3			2
Net income (loss)		95			(5	)		250			44
Net income (loss) attributable to noncontrolling interests, net of tax		9			1			29			10
Net income (loss) attributable to Cabot Corporation	$	86		$	(6	)	$	221		$	34

Weighted-average common shares outstanding:
Basic		56.7			56.5			56.7			56.7
Diluted		57.0			56.5			56.8			56.7

Earnings (loss) per common share:
Basic	$	1.48		$	(0.12	)	$	3.85		$	0.59
Diluted	$	1.48		$	(0.12	)	$	3.84		$	0.59

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED

	Three Months Ended June 30						Nine Months Ended June 30
	2021			2020			2021			2020
	(In millions)
Net income (loss)	$	95		$	(5	)	$	250		$	44
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax		71			31			89			(4	)
Derivatives: net investment hedges
(Gains) losses reclassified to interest expense, net of tax		(1	)		(1	)		(4	)		(3	)
(Gains) losses excluded from effectiveness testing and amortized to interest expense, net of tax		—			—			1			1
Pension and other postretirement benefit liability adjustments, net of tax		2			1			6			2
Other comprehensive income (loss)		72			31			92			(4	)
Comprehensive income (loss)		167			26			342			40
Net income (loss) attributable to noncontrolling interests, net of tax		9			1			29			10
Foreign currency translation adjustment attributable to noncontrolling interests, net of tax		3			2			8			2
Comprehensive income (loss) attributable to noncontrolling interests, net of tax		12			3			37			12
Comprehensive income (loss) attributable to Cabot Corporation	$	155		$	23		$	305		$	28

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

UNAUDITED

	June 30, 2021		September 30, 2020
	(In millions)
Current assets:
Cash and cash equivalents	$	173	$	151
Accounts and notes receivable, net of reserve for doubtful accounts of $3 and $2		633		418
Inventories:
Raw materials		141		82
Finished goods		293		225
Other		53		52
Total inventories		487		359
Prepaid expenses and other current assets		77		50
Total current assets		1,370		978
Property, plant and equipment, net		1,359		1,314
Goodwill		142		134
Equity affiliates		41		39
Intangible assets, net		103		103
Deferred income taxes		46		53
Other assets		164		160
Total assets	$	3,225	$	2,781

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

UNAUDITED

	June 30, 2021			September 30, 2020
	(In millions, except share
	and per share amounts)
Current liabilities:
Short-term borrowings	$	59		$	14
Accounts payable and accrued liabilities		602			488
Income taxes payable		34			20
Current portion of long-term debt		9			7
Total current liabilities		704			529
Long-term debt		1,088			1,094
Deferred income taxes		58			58
Other liabilities		281			286
Contingencies (Note G)
Stockholders' equity:
Preferred stock:
Authorized: 2,000,000 shares of $1 par value		—			—
Issued and Outstanding: None and none
Common stock:
Authorized: 200,000,000 shares of $1 par value, Issued: 56,866,956 and 56,616,030 shares, Outstanding: 56,723,495 and 56,466,638 shares		57			57
Less cost of 143,461 and 149,392 shares of common treasury stock		(4	)		(4	)
Retained earnings		1,169			989
Accumulated other comprehensive income (loss)		(267	)		(351	)
Total Cabot Corporation stockholders' equity		955			691
Noncontrolling interests		139			123
Total stockholders' equity		1,094			814
Total liabilities and stockholders' equity	$	3,225		$	2,781

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	Nine Months Ended June 30
	2021			2020
	(In millions)
Cash Flows from Operating Activities:
Net income (loss)	$	250		$	44
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		117			117
Deferred tax provision (benefit)		4			(20	)
Employee benefit plan settlement		7			—
Equity in earnings of affiliated companies		(3	)		(2	)
Non-cash compensation		16			5
Other non-cash (income) expense		10			4
Cash dividends received from equity affiliates		2			1
Changes in assets and liabilities:
Accounts and notes receivable		(198	)		172
Inventories		(125	)		74
Prepaid expenses and other assets		(15	)		(25	)
Accounts payable and accrued liabilities		97			(68	)
Income taxes payable		12			(10	)
Other liabilities		(17	)		(14	)
Cash provided (used) by operating activities		157			278
Cash Flows from Investing Activities:
Additions to property, plant and equipment		(115	)		(162	)
Cash paid for acquisition of businesses, net of cash acquired of $— and $1		—			(92	)
Other		5			2
Cash provided (used) by investing activities		(110	)		(252	)
Cash Flows from Financing Activities:
Proceeds from issuance (repayments) of commercial paper, net		46			(20	)
Proceeds from long-term debt		150			444
Repayments of long-term debt		(167	)		(334	)
Purchases of common stock		(2	)		(44	)
Proceeds from sales of common stock		5			3
Cash dividends paid to noncontrolling interests		(20	)		(26	)
Cash dividends paid to common stockholders		(60	)		(60	)
Cash provided (used) by financing activities		(48	)		(37	)
Effects of exchange rate changes on cash		23			4
Increase (decrease) in cash and cash equivalents		22			(7	)
Cash and cash equivalents at beginning of period		151			169
Cash and cash equivalents at end of period	$	173		$	162

The accompanying notes are an integral part of these consolidated financial statements.

CABOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

UNAUDITED

	Common Stock, Net of Treasury Stock					Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Cabot Corporation Stockholders’			Noncontrolling			Total Stockholders’
	Shares			Cost		Capital			Earnings			Income (Loss)			Equity			Interests			Equity
	(In millions, except share amounts)
Balance at September 30, 2020		56,467		$	53	$	—		$	989		$	(351	)	$	691		$	123		$	814
Net income (loss)										60						60			10			70
Total other comprehensive income (loss)													89			89			7			96
Cash dividends paid:
Common stock, $0.35 per share										(20	)					(20	)					(20	)
Cash dividends declared to noncontrolling interests																			(1	)		(1	)
Issuance of stock under equity compensation plans		192			—		1									1						1
Amortization of share-based compensation							4									4						4
Purchase and retirement of common stock		(53	)		—		(2	)								(2	)					(2	)
Amount reclassified to retained earnings in excess of additional paid in capital							(3	)		3						—						—
Balance at December 31, 2020		56,606		$	53	$	—		$	1,032		$	(262	)	$	823